Brian Walker's Blog

Over the years I have had the opportunity to be on both
sides of the negotiations over service level agreements (SLAs) between eCommerce
businesses and the hosting and service providers they contract with. The two sides are obviously after different
things, and have different goals. But as an eCommerce business what should you
be looking for in an eCommerce SLA?

(Note: Want to jump to the punch line? Skip to the bottom
of the post. Otherwise please enjoy our trip to the Land of Make Believe.)

First, A Trip To The Neighborhood

As a child a big part of my afternoons was Mr. Rogers, and I would get particularly
excited when it was time to visit the Land of Make Believe. So,
come with me won’t you? (Queue the trolley music and…)

Imagine many, many thousands of funny-looking hand puppets
clicking away and shopping merrily on your site. Business is way up. You, as King Friday,
are the benevolent ruler of this terrific business and Queen Sara
Saturday (your CEO) is quite pleased. Things are going swimmingly and you and your merry customers are so
pleased. You revise your forecast, call Henrietta Pussycat,
your marketing director, and Daniel Striped
Tiger, your merchandise planner, and say “Double down, we’re going places!”

Not A Happy Day In The Neighborhood

But just after you fired off an email to a million of your
happiest customers and launch your big paid search buy and display advertising
program things go terribly awry. First, Queen Sara Saturday calls and says her
son Prince
Tuesday can’t log-on to the site from his ski vacation in Vail. Then, just as you are checking into that, X the Owl, your
customer service manager, hoots that his team is being flooded with customer
complaints that the site is really slow and seems down. A quick check of Twitter
shows that people all over the place are having big problems with the
site. Finally, you jump over to your
laptop. Sure enough, nada. Nothing. No site. 404. You immediately call Lady Elaine
Fairchilde who is your key acct rep at the vendor you use.

Now What, Mr. Friday?

So, after much scrambling, and many conversations on the
phone and IM with Ms. Fairchilde, your eCommerce platform service provider you
are reassured everything is going to be resolved very quickly. You decide to
wait it out, don’t panic, and reassure your management and team in turn. You
even sleep soundly that night. But then when you wake up in the morning you
find nothing has improved – the site is intermittently up and down, but when it
is up it is slow. Something to do with a corrupt customer database and a
problem with the SOAP service that manages the cart. But, Ms. Fairchilde
explains, “No one told us about this campaign and this huge traffic spike. We
were caught flat-footed.” This goes on for days. Your plan to double down has
gone completely flat. Now you are
sitting on a bunch of merchandise and have a bunch of angry, disappointed
customers. So, you take the next most logical step and call your corporate
attorney Peek-a-Boo
Clock. Your question, “How can we hold
this company accountable? Can we recover some of the lost sales, or margin, we
would have otherwise received had our site not gone kaput?”

Everyone Has Feelings

Here is where we need to get serious. “No more little
ditties about how we are feeling” you say to yourself. Mr. Peek-a-Boo calls to say, “I am afraid we
are not in a very good position relative to the agreement and SLAs you reached
with Ms. Fairchilde’s company”. They owe
you nothing – except maybe a small percentage of the fees you own them for their services
– in fact unless the site has been down more than 2% over the last 12 months,
basically they owe you nothing.

The End Of Our Little Dream – What Can You Do?

OK – I apologize for
the long setup. I could not help myself – I don’t have to go through editing
with these posts (bound to change now). Now, let’s get to the punchline:

eCommerce businesses and the hosting and service providers
they contract with are obviously after different things, and typically have
different goals:

The eCommerce
business has a site and customer experience in desperate need of development or
overhaul. The business leader has a goal and is accountable for getting the
site up, operations humming, and transaction flowing - all tied to a revenue
goal which was used to justify the project in the first place. And the next
holiday-season is in the distance like a steam-whistle on a freight train running
down-hill without any brakes. No time to waste. No time to wrestle over the fine print, and
the internal counsel is not often faced with questions over SLAs, so it really
kind of gets skipped in the legal process.

The eCommerce
solution provider is trying to minimize risk and exposure. No service
provider wants to provide an SLA that will risk
their long-term recurring revenue. Meanwhile, they also want to get the deal
done. The sales people want to book the business, and the professional services
people hear the same whistle coming. Meanwhile the legal counsel is much attuned
to questions over SLAs and is motivated not to commit to anything. They have all the arguments prepared.

All this often leads to SLAs being pretty “boilerplate” and
based on the vendor's paper, with little real security for the eCommerce business. Hopefully all goes well, and this never comes
up.

But of course the point of a good SLA is to create accountability and outline a remediation should anything go wrong. While
you need to consult with your legal counsel on specifics, here is a breakdown
on some common things to look for in SLAs from an eCommerce business and
operations perspective:

Ensure
you are compensated for poor site performance. Remediation should include a
sliding scale of performance problems, including downtime as well.

Be
aggressive on the thresholds you are willing to accept. 98% availability
means roughly 14 hours down a month of unplanned down-time. I don’t think any
of us would accept that. Go for 99.99% but we willing to back-down to 99.5% –
that’s ~3.5 hrs of unplanned down-time per month

Remediation
should include some percent of lost sales or gross margin. Compensation
based on some sliding scale of the fees you are paying is not putting teeth
into it. Develop a scale whereby the vendor has to compensate for lost sales or
gross margin if things get bad enough.

Insist on
third-party monitoring tools to ensure transparency. Services from Keynote Systems,
Gomez, or Tealeaf may be appropriate, and there are many lower cost services
out there who can provide automated monitoring. Tip: Look for automated email
or SMS alerts to notify your team of problems. Do not rely on vendor-supplied
reporting, no matter how much you trust them. Their reporting may not be that
good.

Consider
an index of sites to use as a benchmark. This is a way to not accept
mediocrity, but also help the vendor mitigate problems outside their control.
Using the same monitoring services used on your site, ping key benchmark sites
and create an index. Alternatively you can use an index such as that provided
by Keynote.

Do not
allow the vendor to maneuver out of responsibility for your sites performance
and stability. If you ask for
something, even a customization, it is their responsibility to QA and roll-it-out
to production in a responsible way. They need to take ownership. If you add a
third-party piece of JavaScript, same thing. If you send them a flash file or
some HTML, same thing. Watch out for these exceptions in the SLA.

Close
force-majeure loop holes, and insist on failover and redundancy. Stuff
happens, and sometimes it is really bad stuff which I prefer not to belabor,
but in today’s hosting and cloud computing environment there is no excuse for a
vendor serving the mid to enterprise eCommerce solutions marketplace (or
high-scale SMB for that matter) not to be prepared for the worst. Insist that
failover and redundancy guarantees be in place, and that the processes,
procedures, and architectures are documented, expressed and explained.

Be
proactive with your vendor on your campaigns and traffic forecasts. Don’t
make the mistake King Friday made: communicate with the vendor on a regular
basis. No one wants a problem and the vendor can only be prepared if they are
informed.

I hope you enjoyed this little tale and that some of these
pointers are helpful, and as always, let us know how we can help.

Please add to the comments here on the blog to share your
perspective on SLAs from the customer and vendor perspectives.

Comments

As a business owner, how would I go about proving to a hosting provider that downtime contributed to sales or margin negatively? Hosting providers often cite that customers will return to a site to shop if a site is down, especially if the brand is strong and it offers products that stand on their own.Also, you end the article with "Vendor can only be prepared if they are informed" yet you stress "Do not allow the vendor to maneuver out of responsibility for your sites performance and stability?" How can I hold a hosting provider accountable for a lack of planning on my behalf? I understand that, at some point, application software and infrastructure have limits and it seems less than fair to hold my hosting provider accountable to performance metrics if they are not involved in my marketing decisions. I just don't see how they could properly manage capacity without being involved.Thank you for the article.

Great post! Thanks for the insights. In the spirit of fairness, I as the vendor, would also like to see my clients own up to their own SLAs to me. Since our eCommerce service integrates into their ERP system in real time, we need to understand their maintenance windows. This also holds true for our clients QA landscape. If it goes down unannounced, we're left twiddling our thumbs unproductively. In addition, since our platform also provides an integrated issue tracking system, we would love to see our clients own up to a SLA for responding to their clients logged issues.Sam BayerCEOb2b2dot0